I fear that my trading may be displaying signs of being Cleithrophobic. What’s that you ask? It’s a fear of the possibility of being trapped. Like Claustrphobia, but the difference being the perceived ease of exit. This is in reference to my lack of ability to stay in a trade.Every morning I wake up, make my coffee, practice my mindfulness courtesy of the teachings of DrJames Doty, sit down, open the laptop and my broker, and I try and convince myself that ‘today is the day’ and I will not look to close a trade almost as soon as I have opened it. I will commit to staying in.
Well an hour or so into the open and…. it’s not happening. I open a trade and just as quickly open the ‘close’ trade tab! I watch the money going up and down in the ‘Open trade’ column of my broker, and I immediately translate that amount into points in my mind, and as soon as this hits
double digits my trigger finger develops a nervous twitch and ‘click’, the mouse button’s been pressed and the trade has been closed. Profit made. Happy days. Only, it’s not happy days. I feel pain mixed with a little frustration. This feeling is then very helpfully magnified when the market continues to move in what was my favour, and I have to write in my trade diary - ‘Closed trade too early again and left x number of points in the market.’! Even as I write this now, I can feel the tension and the frustration building in my body when I recall these past trades. The problem is, it’s not particularly difficult to recall them as they happen every day, multiple times a day. I feel like Bill Murray in Groundhog Day.
The key to making big money in day trading is first and foremost, the ability to control your emotions, but secondly, it is the ability to stay in a trade and not only that, but ‘add’ to those winning positions, a` la the great Tom Hougaard. A genuine shining light in the murky darkness that is the world of trading.
But bugger me it’s hard to do! I’ve been trading four months now and I feel I am no closer to achieving this than I was when I first started. When I first started trading, I would get 5 or 6 points and boom, snap close the trade and convince myself I did it because I was scalping. Now though I can at least let it get closer and sometimes into, double figures, before I get the shakes and have to close it out. It’s progress I guess, but not really.
So what is it that causes this reaction and how do I overcome it?
As psychologists have found out through many studies our brains are hardwired to avoid pain, seek comfort, and keep us safe both physically and mentally. That’s awesome. Lucky us. However, whilst this is great for life, it’s not so great for trading. As you may or may not know depending on how your own trading is, losing money is not an enjoyable experience, so therefore our brain tries to protect us against this pain the best it can.
How does it do this when it comes to trading?
In my limited experience so far, I’ve found it does one of two things. It either freezes me like a rabbit in the headlights when I’m about to execute a trade and I end up missing my entry, so then it convinces me that I’ve missed the move and I’ll have to wait until the next set up, (this is something that I am now trying to actively avoid doing as I very recently heard Tom Hougaard talk about it in one of his YouTube videos. He spoke about how he had observed millions of trades taken by tens of thousands of people over a ten-year period when he worked for a broker, and this was a common trait in that, people are so reluctant to jump on a move which was already underway, they would instead wait for the perceived perfect entry, and in the process, miss very many lucrative opportunities).
Or, it makes me close the trade prematurely even though I may be aware consciously on some level, that there is the potential for a lot more of the move yet to come. It’s in closing the trade early, the amygdala, which is responsible for triggering the release of stress hormones in the body which heighten our emotional and physical response to a perceived threat, slows down its signals, and I go back to feeling calm and safe, (that’s a very basic and rudimentary explanation, but it’s enough that you get the gist).
Now that’s good if I were in actual danger, that’s what I want my brain to do, but it’s not so good if I want to be a successful trader! So how can I overcome this?
Simple. Just condition my mind against losing. Ta-daa!
That was easy.
I wish! In reality it’s far from easy to simply change a habit let alone override a hardwired, inbuilt response such as that.
But all is not lost. It can be done through visualisation. I am a very firm believer and new practitioner in the Law of Attraction and manifesting and I believe that how we think, what we think about, and what we believe, shapes our reality. 100%. By changing our beliefs and our thoughts, we can alter our physical reality to become any reality that we desire. In fact, this is exactly what Tom Hougaard himself does, and also talks about at length in his excellent book, ‘Best Loser Wins.’ Whilst I acknowledge this and truly believe in its power, I also think that it’s not quite enough on its own, especially when it comes to trading. I feel that you need to experience the pain in real life, not just in your imagination. The problem for me is that if you haven’t experienced something, how can you accurately imagine it?
For example, I can visualise what it’s like to be an astronaut sitting in a rocket
on the launchpad, the countdown sounding, the engines igniting, everything around me shaking and vibrating, but is my visualisation really anything like the actual experience? I very much doubt it!
Now this brings me on to what I am about to say, and I accept it’s potentially a little extreme maybe, but hear me out. I toyed with the idea (and still am) of entering a trade, and when I had the opportunity, move my stop to breakeven so I didn’t lose anything, but then just sit and watch and let it play out. If it goes 50, 60, 70 points in profit, don’t close it. In fact, let it come all the way back to my entry if that’s what is happening, and ultimately, let the market stop me out.
Why the ‘bleep’ would I do that? Because now, I would have something very important, way more important than profit. I would have the ‘actual’ experience of exactly how those chemicals felt in my body, how I reacted and how they affected my emotions. How my thoughts were maybe racing when every fibre of my being wanted me to desperately close the trade, but I didn’t. Now I know what the pain actually feels like. In having this ‘real’ experience, I can use it to help me understand my feelings, my emotions and my reactions, and I can use this knowledge to my advantage to improve my ability to control my emotional state when I trade. I’ll be far more self-aware of how I react to losing a large number of points, which in turn will help me to achieve my goal of staying in a trade. I will have lessened the effect of the fear of loss. A fearless trader (not reckless) is a good trader and money is a by-product of good trading.
In fact, I think that this should be a regular undertaking to help build resilience and emotional control, just as studying charts should be a regular exercise to improve pattern recognition and Technical Analysis, if you want to become a better trader.
As it happens I kind of did this, well, a variation of it on Thursday. I started the morning well with a couple of scalps and was up 20+ points, but then disaster struck, and I had three losing trades back- to-back, two of which were bigger than my biggest winner and the other was a just shy of it. I remember my frustration got the better of me and I got annoyed, I stood up and was going to shut everything down and go out for a walk, but instead, I said to myself out loud “You are going to sit through this pain because it’s how you learn, and you are going to scalp your way back to breakeven.” And that’s just what I did. I sat down, took a couple of deep breaths and as my anger subsided and I felt a calmness once again. Four trades later and I was 2 points to the good! I’d done something I had not done before. I faced the pain, and I embraced it, I overcame it, and it felt bloody good I can tell you! It proved to me I could do it, but also it laid waste to a belief that I noticed I had somewhat subconsciously begun to adopt, in that I couldn’t trade if the market was in a trading range. I was simply no good at it, I just couldn’t do it. I was always on the wrong side, only now I had proof that this was in fact, not the case.
In this one morning I felt my trading had changed forever, and I felt like I had levelled up. I still have a very, very long road ahead of me to reach my goal, but , I’m walking that road one step at a time, and that’s the most important thing.
Now, if only I could get myself into a position that actually moves 50+ points…….
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